Legal Information Notice: This checklist provides general educational information only. It is not legal advice, does not create an attorney-client relationship, and may not apply to your jurisdiction or circumstances. Laws and deadlines vary. Do not rely on this checklist for a specific legal decision or deadline; consult a qualified attorney licensed in the relevant jurisdiction.
- The monthly payment can hide the total financing cost.
- A low rate does not necessarily mean a low-cost loan.
- Equipment can depreciate faster than the debt declines.
- Used equipment may have uncertain residual value.
- The lender may require a down payment.
- Fees can substantially increase acquisition cost.
- Documentation fees should be identified.
- Origination fees should be identified.
- Personal guarantees may be required.
- Collateral requirements may extend beyond the equipment.
- Cross-collateralization can increase exposure.
- Balloon payments can create refinancing risk.
- Variable rates can change payments.
- Prepayment penalties can limit flexibility.
- Equipment may become obsolete.
- Maintenance costs are part of the economic decision.
- Downtime can destroy the expected return.
- Manufacturer warranties may not cover everything.
- Vendor financing should be compared with independent financing.
- Leasing and purchasing produce different economics.
- Tax treatment can materially affect the effective cost.
- Insurance requirements add to ownership cost.
- Delivery delays can leave you paying before generating revenue.
- Financing equipment that doesn’t generate sufficient cash flow creates a debt problem.
- The right question is “What will this equipment actually earn me?”, not “What is the monthly payment?”
B. PREMIUM BUYER CHECKLIST
EQUIPMENT
☐ Exact equipment identified
☐ New/used condition documented
☐ Serial number recorded
☐ Age verified
☐ Hours/usage verified
☐ Maintenance history obtained
☐ Warranty reviewed
☐ Inspection completed
ECONOMIC VALUE
☐ Purchase price
☐ Installation
☐ Delivery
☐ Training
☐ Maintenance
☐ Insurance
☐ Financing
☐ Expected useful life
☐ Expected resale value
FINANCING
☐ Interest rate
☐ APR/effective cost where applicable
☐ Term
☐ Down payment
☐ Origination fees
☐ Documentation fees
☐ Prepayment terms
☐ Balloon payment
☐ Variable-rate provisions
☐ Personal guarantee
CASH-FLOW TEST
Estimate:
Additional Revenue
Cost Savings
−
Financing
−
Maintenance
−
Insurance
−
Downtime
=
Net Economic Benefit
Then test the result at:
☐ 10% lower revenue
☐ 20% lower revenue
☐ 20% higher maintenance
☐ 3-month delayed implementation
FINAL QUESTION
If this equipment produces 30% less economic benefit than expected, can the business still comfortably make the payments?
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